In search of a thesis

There was a fascinating thread on Athletics Nation last week about whom the A’s might add to the starting rotation after ace Barry Zito heads off next spring to vastly bigger paychecks in L.A. or New York. (I promise, no more A’s posts for a while after this.) What struck me was not so much the content of the discussion–which centered on the possible return of former A’s ace Mark Mulder–but the language:

"Low risk/High reward!"

"Durability is a oversaturated market, I believe Beane is thinking.  It just costs too much."

"I’m not totally convinced he’ll be undervalued enough in the marketplace to be affordable."

This is all straight out of Moneyball, Michael Lewis’s 2003 examination of how the A’s build winning teams on a tight budget. Lewis constructs his account around an efficient markets framework: A’s general manager Billy Beane saw a market inefficiency in how hitters were priced. Scouts and general managers overvalued perceived athleticism, and undervalued chubby guys who walked a lot. So the A’s signed guys, chubby or otherwise, who walked a lot. As I wrote in my Curious Capitalist blog a couple of weeks ago, this thesis–after getting lots of criticism from baseball types and even Steven "Freakonomics" Levitt–has recently received empirical backing from a study published in the Journal of Economic Perspectives. What’s even more impressive to me, though, is that all these A’s fans are now conversing in a language probably introduced to them by Lewis, the language of finance.

It’s not just A’s fans. The professors who post on The New Republic‘s Open University blog have been engaged in a debate about whether the Moneyball argument can be applied to academic hiring.

As someone who is writing a book that is at least tangentially related to these topics, I think there’s a lesson for me here. When people ask me what my book is about, I have a couple of answers. If they’ve been to business school, I usually say it’s about the rise and fall of the efficient market hypothesis and leave it that. If they haven’t, I try something along the lines of: It’s the intellectual history of an academic idea that changed the world of investing and then turned out to be at least partly wrong. 

A few months ago, though, Michael Schrage followed up the what’s-the-book-about question with a much harder one. "What’s your thesis?" he asked. I said I’d get back to him.

I’ve taken a certain amount of (perverse?) pride in the fact that my book isn’t yet another Tipping Point/Wisdom of Crowds/Long Tail exercise in identifying a simple idea that purportedly explains almost everything. That genre’s getting a little tired (although it sure has been lucrative). But it’s not enough just to say that I’m telling a complex story rather than making a simple argument. I still need a thesis, an explicit intellectual framework that tells me as I go back through my 340 pages of manuscript what to throw out, what to leave in, and what to add more of. Sure, it’s Lewis’s storytelling that got so many people to buy Moneyball. But it’s his thesis, his intellectual framework, that has so lodged itself in the minds of A’s fans that they talk of undervaluation and market saturation and risk-reward tradeoffs when they talk of baseball.

So what’s the thesis of my book? Is it that markets are sort of efficient but not perfectly so, and that this distinction matters a lot in some situations and very little in others? Is it that social-science theories that make sense in the context in which they arise can seem utterly nonsensical when removed from that context? Is it that people find it terribly hard to give up a particular worldview, even in the face of masses of conflicting evidence? Is it that the test of a scientific theory is its usefulness, not its correctness?

All those play a role in the book. But none strikes me as the unifying idea. So what is? One common trait of the books named above is that they all take ideas from academia and use them to explore everyday life. My book is largely set on college campuses. The key might be to take a concept from outside academia and use it in explaining why these professors have behaved the way they have. Maybe it’s something as simple as common sense or judgment. More news later on this same station.

The A’s as a value stock

In investing, it’s all about expectations. What matters is not the brilliance of a company’s business model or the competence of its management — it’s about how your expectations of its future prospects stack up against those of the market as a whole.

Sports fandom is a little bit like that. This realization originally came to me when I attended my first Alabama football game, in 1989. (Thanks for the ticket, Dr. Leitner!) I’d grown up going to Cal football games, where the baseline expectation was defeat and even glorious victories contained their share of interceptions and ridiculous penalties. My first game in Tuscaloosa was against some lesser opponent or other (Ole Miss, perhaps?), and the sour, sure-hope-the-Tide-don’t-screw-up mood in the stadium shocked me. Hardly anybody, except the drunk students, seemed to be having any fun.

As martiniSo anyway, game three of the American League Championship Series is about to start, with my Athletics down 2-0. The special A’s martini at right (with olives and a twist) was made to celebrate the glorious three-game victory over the Twins in the division. Now things aren’t looking so good, but the tone on Athletics Nation remains mostly positive. In fact, most of the fans posting there seem to relish the fact that their team has dug itself into underdog status. If they come back, it’ll show those no-good Yankee fans on ESPN and Fox! And if they don’t, well, they will have still done pretty well for a team nobody gave much of a shot to even get past the Twins.

The A’s, then, are a value stock. Or maybe they’re a GARP (growth at a reasonable price) stock. After all, it’s not much fun to support a team that’s never been anything but bad–the Devil Rays, for example. But neither does it seem to be a lot of fun to be a Yankees or Chelsea fan these days. It might be okay if you acquired your fandom during some long-forgotten streak of losing seasons. But that’s not when most people adopt teams. Which is true in investing as well.

UPDATE: After all that brave talk, it was still pretty unpleasant to watch them lose 3-0 tonight. I even switched over to Daisy Cooks! for a couple of innings.

Germans chanting “U-S-A!”

I had hopes of blogging during my World Cup visit to Germany a week-and-a-half ago, but the demands of looking after a seven-year-old on the road, plus the fact that I forgot my laptop and thus had to share computer time with a 13-year-old in possession of gaming software, got in the way of that. And then I got sick after my return.

So it’s now a little late to weigh in on the U.S.-Italy match in Kaiserslautern, except to say this. Much has been made of the fact that the U.S. fans outshouted the Italian ones, and that this cheering advantage may have played a role in the result (it certainly seemed to reflect the referee’s calls over the last 20-30 minutes of the game). This was a great thing, one of the few bright spots of this World Cup for the U.S. But it wasn’t because there were more dyed-in-the-wool U.S. supporters on hand than Italian ones. It was because the neutrals — the Germans, that is — turned on the ref and the diving Italians toward the end of the first half.

manyflagmanThe Germans with tickets to the World Cup matches not featuring their country’s team have endearingly adopted a policy of rooting for the underdogs, and in particular for the teams least likely to bring tens of thousands of supporters. At the Netherlands-Ivory Coast match we attended, lots of the Germans had gone so far as to buy Ivory Coast shirts. With U.S.-Italy, things were of course more complicated. We were the soccer underdog, but are the overdog in so many other ways that the Germans weren’t going to be comfortable dressing up in red-white-and-blue. Some, like the fellow pictured here, split the difference. Others dressed as disinterested civilians.

But once the game got going, and the Italian team played as its wont (defensively, cynically, etc.), sentiment shifted toward the Americans. We were sitting in a section that seemed to be filled mostly with locals, supporters of the team that usually occupies the stadium, FC Kaiserslautern. And at some point around the middle of the game, they all began chanting “U-S-A! U-S-A!” They did get bored with that after a while, and began chanting “Deutschland!” and singing “Wir fahren nach Berlin” (We’re going to Berlin) instead. But they kept cheering U.S. attacks and whistling derisively at the Italians.

It may not be much to be able to claim that your country’s soccer team is more beloved (outside of Italy) than Italy’s is. But these days we Americans ought to take whatever we can get.

Okay, so maybe we’re not ready for globalization

After Monday’s debacle against the Czech Republic, I seriously considered writing another column using the World Cup to make exactly the opposite point as last week’s plea for U.S. optimism in the face of globalization.

Landon Donovan was too much of a wimp to stick it out at Bayer Leverkusen and learn how to be tough rather than just talented, I could have written. DaMarcus Beasley’s lack of worldliness is dooming him to second-rate status at PSV and has halted his development as a soccer player. We Americans can’t hack it in a world that doesn’t revolve around us. Those Czechs, meanwhile, all have to go abroad and learn new languages if they’re to get anywhere in the sport. They’re the ones who are ready for globalization. Or something like that. That’s the great thing about opinion journalism. Starting with a given set of facts, you can make almost any point you want.

Back in the saddle

I just did my first bit of Fortune work in a month. It’s a web column on the World Cup and U.S. economic competitiveness. Kind of a stretch, I know. But I needed to make some use of all those hours I spend reading soccer news online every day, right?

I’ve been off working on my book. I had initially thought I might post comments about whatever chapter or subject I was working on each day, but that didn’t happen. I got into full I Am a Book Writer and I Cannot Be Interrupted mode. Not that it got me to finish the thing. I’ve still got some big empty spots to fill toward the end. But I’m getting there. And maybe, now that I’m back to the daily interruptions of life at Fortune, I’ll actually get around to discussing the book occasionally here. Which was the whole idea of this blog in the first place.

West Ham are magic

There’s a mug my father acquired during a work-related stay in London in the mid-1970s that’s always my first choice for coffee drinking when I’m in Northern California. It’s illustrated with a cheesy painting of happy soccer fans, accompanied by the slogan "West Ham Are Magic."

Today I feel the magic. I sort of adopted West Ham as my team when we lived in London in 2000-2001, partly because of the mug, partly because our postman was so thrilled when he delivered tickets to a game at Upton Park. But today’s FA Cup final, which the Hammers tragically lost to Liverpool on penalty kicks after two exhausting hours of fantastic, end-to-end soccer, made me a West Ham fan for life.

They weren’t nearly as good as Liverpool. All of their three goals were lucky breaks of one sort or another, while Liverpool’s three were brilliant. But West Ham kept fighting and fighting, most valiantly Marlon Harewood who almost kicked in a winning goal with his sprained ankle in overtime.

What really cemented my loyalty, though, was this: The West Ham song is "I’m Forever Blowing Bubbles," an American hit from the 1920s about futility and crazy dreams. And all through the broadcast (which cost $24.95 on pay-per-view and was worth every penny) you could see bubbles wafting by the camera.

The West Ham-Dubai connection

West HamAs I experiment with this blog, I’ve been struggling to figure out what if any link there is between the stuff I get paid to write about (business and economics, mostly) and the things I keep posting here about food, soccer, Dutch literature, etc.

Thanks to a loyal reader in Philadelphia, I now see the connection. He forwarded me a link to a story in the Guardian about how my team West Ham United went to Dubai for a training camp last week — and failed to bring along the two Israeli citizens on the team, Yossi Benayoun (pictured at left) and Yaniv Katan, because Israelis aren’t allowed into the United Arab Emirates (of which Dubai is one).

Now I don’t feel bad at all for Benayoun and Katan, who were treated instead to a team-paid vacation in Marbella, which sounds like a lot more fun than sweating on the shores of the Persian Gulf. But it was a reminder that all the talk during the Dubai Ports controversy about Dubai being a bastion of freedom and progressive thinking was maybe a bit exaggerated.

Sure, Dubai is more free and progressive than its neighbor Saudi Arabia. But then, so are many European prisons (although not American ones, of course). Is Dubai a democracy? No. Is speech free there? No. More to the point, would Dubai ever let a foreign company run its port? Probably not, since Dubai is effectively one big corporation itself, with Sheik Mohammed as CEO.

None of this means we need to boycott the place. But maybe the politicians who raised all that hell about a company owned by Dubai’s government taking over operations at several American ports weren’t being completely ridiculous.

It’s one thing to let British or German or Japanese companies buy up big chunks of the U.S. economy — we do the same to theirs. Maybe it’s not so crazy, though, to think twice when those who do the buying don’t play by the same rules back home as we do. Orthodox economic theory says we shouldn’t care, of course: Money’s money. But I say economic theory that isn’t tempered with the occasional West Ham anecdote isn’t worth much.

Let’s go, uh, Red Bull! Or is it Bulls?

The home opener for New York’s newly renamed soccer team was tonight. I still can’t decide whether it’s heartening or appalling that the Austrian makers of a cough-syrupy energy drink have bought and remade the local team in their image. It’s definitely hard to get nostalgic about the name New York/New Jersey MetroStars, though. The New York Cosmos would be another matter.

Red BullsThe Red Bull people definitely put on a good show. Former Cosmos Pele, Franz Beckenbauer, and Giorgio Chinaglia were all on hand for a pregame ceremony that also featured a trained bald eagle and three skydivers (one of whom is pictured at left). “Awesome!” the Boy said upon sighting either the eagle or the skydivers or maybe both. He seemed pretty interested in the first half action on field, too (no scoring, but some close calls). But with Wyclef Jean and Shakira making lots of noise on stage at half time, he asked, “When will it stop?” then fell asleep.

Attendance was reported at 35,793, which is huge for an MLS game, but still doesn’t seem like much at Giants Stadium. I pine for the cozy little soccer stadium that they’re going to build in Harrison, N.J. Somehow I think going there will be like heading out to Upton Park in London for a West Ham game — albeit without the jellied eels. And why would that be such a good thing? I don’t know, exactly. Maybe that it would give some sense of connection to the soccer-playing world? Or maybe just that a nice, short soccer game (unlike baseball and football, the whole thing almost never lasts more than two hours) in a nice little stadium would be a nice little thing.

Oh, the final score was 0-0. And rookie defender Marvell Wynne was the best thing about Red Bulls.